Koinex Shuts Down Regulatory Uncertainty

Notice: This page is a freshly imported case study from the original repository. The original content was in a different format, and may not have relevant information for all sections. Please help restructure the content by moving information from the 'About' section to other sections, and add any missing information or sources you can find. If you are new here, please read General Tutorial on Wikis or Anatomy of a Case Study for help getting started.

Notice: This page contains sources which are not attributed to any text. The unattributed sources follow the initial description. Please assist by visiting each source, reviewing the content, and placing that reference next to any text it can be used to support. Feel free to add any information that you come across which isn't present already. Sources which don't contain any relevant information can be removed. Broken links can be replaced with versions from the Internet Archive. See General Tutorial on Wikis, Anatomy of a Case Study, and/or Citing Your Sources Guide for additional information. Thanks for your help!

Koinex

Koinex was one of the largest exchange platforms in India. The Indian central bank released guidance that all banks should refuse to interact with any cryptocurrency-related entities. Koinex's accounts were frozen and all transactions (even routine transactions like paying salaries) were regularly blocked. The platform was forced to shut down. Customers were given limited time to withdraw funds, and additional fees applied on fiat withdrawals. It is unknown what portion of customer funds were forfeited as a result.

This exchange or platform is based in India, or the incident targeted people primarily in India.

About Koinex

"WELCOME TO INDIA'S MOST ADVANCED DIGITAL ASSETS EXCHANGE" "Koinex is India's most advanced digital assets exchange. It's the first complete exchange supporting multiple cryptocurrencies/ tokens on a single platform. Built entirely from scratch, Koinex is aimed at bringing the magic of blockchain technology to India. Bitcoin - the world's first cryptocurrency - was introduced in 2009 and since then over 1000 tradable tokens have come into existence. However, for a long time India missed out on the tremendous opportunity that the rest of the world had been enjoying. And Koinex has been built to to bridge that gap."

"We set up Koinex in the summer of 2017 and began digital assets exchange services on August 25, 2017. As the first open order-book, fully KYC compliant, multi-asset exchange, we opened the world of blockchains to India, bridging all gaps in trading compared to international counterparts. Within 4 months of operations, Koinex became India’s largest and favourite digital assets exchange — recording $265M in trading volume and on boarding 40K+ new users in 24 hours at peak in the month of December. Koinex also became India’s fastest growing startup to see such metrics and an ultra-quick profitability."

"Koinex has been built over cutting edge technology. Proprietary trading engine, wallet and platform architectures, grade A security, user-centric UI/UX, and tons of user-demanded features are some of the things which define Koinex. It's being carved to perfection, one day at a time, all with your constant love and support." "Koinex supports Ethereum (ETH), Bitcoin (BTC), Litecoin (LTC), Ripple (XRP), BCH (Bitcoin Cash), Omisego (OMG), Request (REQ), 0x Protocol (ZEROX), Golem (GNT), Basic Attention Token (BAT), (NEO), (GAS), Aeternity (AE), Tron (TRX), Stellar Lumens (XLM), (AION), NUCLEUS VISION(NCASH), NANO(XRB) and (EOS)." "[Y]ou can use your Koinex wallets to store cryptocurrencies securely. You can also send and receive cryptocurrencies to these wallets."

"The team behind Koinex are people just like you. We are a bunch of technologists and product designers who share the same love and passion for blockchain technology and cryptocurrencies as you. We have been traders ourselves, and we are working to solve the pain known to all of us, one step at a time. It is our vision to make India a hotbed of blockchain technology development and adoption. We assure you that the coming future is going to be delightful and full of surprises, as we strive to improve Koinex, build more trading tools, develop more blockchain products, and create a holistic cryptocurrency trading ecosystem."

"Koinex is a live, open orderbook, peer-to-peer digital assets exchange. Users can trade in various cryptocurrencies and tokens against INR, use the Koinex wallets to make a payment in cryptocurrencies and analyze/ track the cryptocurrency markets." "Trade price of cryptocurrencies on Koinex is determined by the matching of a buy order price and a sell order price. The users completely determine the market price of a cryptocurrency on the platform. The “Last Traded Price” is the reflection of the market price on Koinex and it is the price at which the last buy and sell orders were matched."

"98% of all cryptocurrencies on Koinex are stored in multiple offline storages. In case there is a huge amount of withdrawal requests, it may take a few hours to replenish funds to the server from where the withdrawals will be processed. In that duration, all withdrawal requests are marked as “Pending”" "[I]t is completely safe to use Koinex for your cryptocurrency trades. Koinex has been built with grade-A security and latest technology architectures to ensure that all data, cryptocurrencies, wallets and INR volumes stay safe, secure and inaccessible to unauthorized entities."

"Koinex has various audit services running in the background to check malicious activities. If you find a matching buy and sell order on the orderbook which is not getting executed, it may be due to the same service freezing trades momentarily. Once the audit services completes its checks, the pending orders will be executed appropriately."

"However, this short-lived astronomical growth curve was stalled with the emergence of issues with formal banking channels on which exchange services were deeply dependent on. On April 6, 2018, the Reserve Bank of India issued a circular instructing all regulated financial services entities to exit relationships with companies and individuals dealing in virtual currencies and block all such crypto-related transactions. While the RBI circular, resulting into a complete banking ban, has been challenged in the Supreme Court of India, the status quo since April 2018 continues till today."

"In a Medium post published Thursday, the Koinex exchange says it's been forced to shutter its services as a de facto ban on banking relationships for crypto firms – ordered by the Reserve Bank of India (RBI) in April 2018 – has meant that it is economically unfeasible to continue with normal business."

"The last 14 months have been tough to operate a digital assets trading business in India, on account of the closure of bank accounts holding user deposits. We took on immense financial burden to continue trading of digital assets and allow law-abiding Indians to participate in the decentralized revolution that has swept across the globe. Multiple delays by the government agencies in clarifying the regulatory framework for cryptocurrencies despite our pending writ petition in the Supreme Court of India, coupled with regular disruption in our operations, the final decision has been taken after duly considering all the latest developments in the crypto and blockchain industry in India. We have stayed away from disclosing details to the public in the larger interest of mindfully steering the industry towards positive regulations, but unfortunately we’re not too hopeful that things will change for the better in the near future."

"We have consistently been facing denials in payment services from payment gateways, bank account closures and blocking of transactions for trading of digital assets. Even for non-crypto transactions like payment of salary, rent and purchase of equipment, our team members, service providers and vendors have had to answer questions from their respective banks - just because of an association with a digital assets exchange operator."

"After months of uncertainty and disruption, we have regretfully decided to shut down all digital assets exchange services and operations today. It is, without a doubt, a sad day for all digital assets and blockchain enthusiasts in India and we can’t express in words how hard it’s been for us to make this decision."

"We've to regretfully inform all our users that we've decided to permanently disable all digital assets trading services on all Koinex platforms from 2 PM IST today (27th June 2019)." "After trading of digital assets closes at 2:00 PM IST on Thursday, 27th June 2019, we will begin remitting your INR balances to your bank accounts registered with Koinex."

"The digital assets trading services will be permanently disabled on all our platforms at 2.00 PM IST on Thursday, June 27, 2019. All open orders after this deadline will be automatically cancelled and the funds will be returned to corresponding wallets. Users are requested to plan their trading activity carefully and close their trade positions."

"A snapshot of the wallet balances at this time will be taken for record, and the effort to disburse INR balances will begin immediately. Since the bank accounts with user funds are still frozen and the capital is held up, we have made arrangements for funds from our own resources, so that we return as much as we possibly can, back to our users and alleviate their position in reference to the funds held up in these frozen accounts. This is a voluntary move and is being undertaken even though it is not our legal obligation, only with a view to reduce the hardship that it is causing to so many of the users who reposed faith and supported our business effort while things were not constrained. This is our way of saying ‘thank you’ and bidding adieu."

"That said, we want to underscore that this is being done merely as a voluntary effort, out of good faith and in order to end things in as elegant manner as we can afford. We are not out of place in repeating that the funds to repay our users for the balances that are locked up in the frozen accounts are being paid from our own resources and comes at a cost to arrange such funds. In the course of the next 5 weeks, we will attempt to release all user deposits to their registered bank accounts after levying a convenience fee (between INR 10 and INR 2000, depending on the INR wallet balance)."

"Please note that in order to provide higher security for your funds, we have decided to suspend our mobile app during closure. Kindly access your account through a desktop or mobile web browser to withdraw your digital assets." "We're supporting crypto withdrawals upto 8 decimal places for all listed digital assets. We'll process withdrawals for balances above the minimum limit only. Due to a large pipeline of requests, the withdrawals will be processed within 3 days of initiation."

"We thank you for all your support and rest assured we are here to help you securely withdraw your digital assets (Koins) from your Koin wallets. The deadline to withdraw all your Koins is 9 PM IST on Monday, 15th July 2019." "We're committed to helping all users in withdrawing their funds safely & after requests from users, we've extended crypto withdrawal deadline till 9 PM IST, 22nd July 2019. Everyone is requested to adhere to this extended deadline compulsorily."

"In view of multiple requests, we are extending the crypto withdrawal deadline till 9 PM IST, 31 July 2019. This is the final extension. Post deadline, we will not be able to support storage/withdrawal of cryptos. Users will be solely responsible for the loss of crypto thereafter."

This exchange or platform is based in India, or the incident targeted people primarily in India.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - Koinex Shuts Down Regulatory Uncertainty

Date	Event	Description
June 27th, 2019	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost is unknown.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.